Citi plans machine takeover of call centers; Shareholders bail on two foreign banks

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Earnings miss
HSBC reported full-year 2018 earnings of $12.6 billion, more than $1 billion less than analysts expected, as fourth quarter profits came in less than forecast. “The bank said customers held off on business when markets turned volatile last year, hitting revenue in its global markets business and retail banking and wealth management units,” the Wall Street Journal says. Wall Street Journal, Financial Times

Big fish
Little known Norinchukin Bank, “a 95-year-old bank that holds around $600 billion in deposits from Japan’s agricultural and fishing collectives has amassed a significant share of the estimated $700 billion global market for collateralized loan obligations, or CLOs — complex investment vehicles that buy more than half of U.S. loans to junk-rated companies.” the Journal reports. “That makes Norinchukin just about as important to a U.S. retailer as it is to a Japanese farmer. The privately held bank’s $62 billion CLO portfolio is larger than those of either of the two biggest U.S. bank buyers, Wells Fargo and JPMorgan Chase. And its influence is growing: Norinchukin added about $10 billion to its holdings in the last three months of 2018, nearly a third of all U.S. and European CLO issuance over that period.” Wall Street Journal, Financial Times

Financial Times

In jeopardy
Citigroup CEO Michael Corbat said “tens of thousands” of people in the bank’s call centers could be replaced by machines that can both “radically change or improve” customers’ experience and reduce costs. His comments “are the most explicit the company has been on how the $8 billion a year Citi spends on technology could transform its vast consumer bank, which serves 100 million customers across 19 markets,” the paper says.

Selling off
Two of Europe’s biggest banks have lost some critical investor support. U.S. hedge fund Tiger Global, which “had been among the staunchest defenders of chief executive Jes Staley’s plan to improve the bank’s languishing share price by reviving its investment bank,” has sold its entire stake in Barclays. “Tiger’s exit comes at a difficult juncture for Barclays, which is trying to prevent Edward Bramson, the activist investor, from forcing his way on to the board and engineering a shift in strategy that would involve shrinking the investment bank.”

Separately, HNA, the big Chinese insurance company and Deutsche Bank’s largest shareholder, has reduced its stake in the bank “by nearly a fifth to 6.3%. The move is the latest in a recent series of retreats made by the financially stretched Chinese group.”

No shorts allowed
Germany’s financial regulator has barred investors from shorting the stock of digital payments company Wirecard, “marking the first time it has used such powers to restrict trading in a single stock,” the paper says. BaFin last used the measure during the 2008 financial crisis to protect the stocks of 11 banks. The regulator cited Wirecard’s “importance for the economy” and the “serious threat to market confidence” following a recent nosedive in its stock price after the paper “revealed the existence of an internal investigation into alleged accounting irregularities involving several of the group’s subsidiaries in Asia.”

Eye on America
British fintech GoCardless has raised $75 million “from some of the biggest technology investors” as it prepares to launch in the U.S. this year. The company “allows its more than 30,000 corporate clients to collect recurring payments online using bank account details rather than debit and credit card numbers. The company processes about $10 billion of payments globally every year.”

Not kid stuff
So-called sandboxes for financial technology experimentation create an image “of small boys clad in tiny hoodies using little pails. In fact, these sandboxes are battlefields on which the big tech companies are taking great risks with our financial future,” argues Karen Petrou, managing partner of Federal Financial Analytics, in an op-ed. “It’s troubling enough that Facebook, Google and the like know where we live, who our friends are, and what we think. Consumers offered a savings account by a tech company are unlikely to understand that its higher-return products come with a hidden catch: no safety net or upfront capital to cover claims for redress. Those who trust fintech providers are taking risks virtually no one can predict. With so much at stake, we cannot wait to find out if sandboxes allow cage fighting.”

New York Times

Branching out
As American banks “shift employees and hundreds of billions of dollars’ worth of assets from London to new subsidiaries” across the European Union, “one thing is clear about the legacy of Brexit: Financial services will be spread across Europe, with no one city again dominating the financial arena as London has.”

Washington Post

Misconduct alleged
The Federal Housing Finance Agency’s inspector general said former Director Mel Watt attempted to “coerce or induce” a relationship with a female employee who sought a promotion and accused him of two counts of misconduct. The IG’s report, which was completed last November, was obtained by the paper through a Freedom of Information Act request. “We find that there are no circumstances under which it would be appropriate for the head of FHFA to induce a subordinate female employee to meet with him alone, in his apartment, for a conversation in which he professes his attraction for that employee and holds out opportunities for the employee to serve in specific executive positions over which he exercises total control,” the report says. Watt, who retired at the end of his term last month, has denied he did anything wrong.

Quotable

“When you think of data, AI [artificial intelligence], raw digitization of changing processes, we still have tens of thousands of people in call centers, and we know when we can digitize those processes we not only radically change or improve the customer experience, it costs less to provide.” — Citigroup CEO Michael Corbat.

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